Late Payment Culture A “Chronic Disease” In Small Business Space

Sheffield is the worst area in the UK for late payments, as just 24% of all invoices are paid on time compared to the national average of 51%

Just 51% of UK micro-business invoices were paid on time last year, according to FreeAgent.

The survey of more than 600,000 invoices sent by over 6,600 micro-business customers revealed that businesses in Sheffield are the worst affected – with just 24% of all invoices settled within three days of being issued.

In contrast, Manchester businesses have it the easiest when it comes to getting what they’re owed, as 75% of all bills are settled on time.

“We know that late payment is a huge issue for the UK economy, but our research shows just how widespread it is for the freelance and micro-business sector.

“We found that just half of the invoices sent by micro-businesses across the UK get paid late, while there are certain hotspots where the problem is even more prevalent. And this isn’t just clients taking an extra week or two to pay – it also includes the chronic late payers who sit on invoices for months, as well as those who just don’t pay at all.

“It’s certainly good news that the government recognises the late payment problem and is consulting over the appointment of a small business commissioner to tackle the issue. However, I fear that whoever is appointed will have limited power to actually punish companies who routinely pay late, aside from just naming and shaming them.”

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Following on from the ‘disease’ analogy, prevention is better than cure.

Of all businesses micro businesses can least of all afford to cope with late payment of invoices. The FSB recently reported that prompt payment could help prevent 50k businesses from going to the wall.

Owners of micro businesses must make an admittedly difficult decision, should they go into business with a late payer or should they turn it away? If they go into business with a late payer they risk not just late payment but possibly the collapse of everything they have built up. If they turn away a late paying customer before going into business they risk a temporary setback but they will still be in business.

Suppliers in the wider business community also need to make a hard decision, should they stand up for themselves or hope that the government will finally come to their rescue? Based on the time it’s taking for the latter to occur it must now surely be time for the former.

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